Question 2 (Total 10 Marks) Corporation Act 2001 (Cth)

Gerry Bell and his wife Tina are directors of a company which trades as a small fishing retail business (G&T Bell Pty Ltd). Tina always said she wanted to marry Gerry because he was an accountant and she thought he had the financial knowledge that she did not possess. She trusted his business acumen. The business operates from a small shop near Darwins waterfront worth $300,000 which the company owns, although the bank holds a mortgage over the property in the sum of $275,000. The company also owns stock and fittings worth $15,000. Continued hot weather has badly affected business, but some of Gerrys fishermen friends have told him the weather would soon get better for sure. Gerry trusts his fishermen friends for their local knowledge and accordingly takes out advertising costing the company $50,000. Tina goes along with this as she trusts Gerrys judgement although she is nervous that suppliers are still owed $40,000 and have not enforced their debts as they too hope the weather will improve and that this will help business conditions. The heat only gets worse and customers drop off. The advertising company owed $50,000 is not paid when the debt fell due and applies to the court for a winding up order.

Is G&T Bell Pty Ltd insolvent? Will Gerry and Tina Bell be liable under s588G?